Commissioner of Internal Revenue v. Wodehouse/Dissent Frankfurter

Mr. Justice FRANKFURTER, with whom Mr. Justice MURPHY and Mr. Justice JACKSON join, dissenting.

In the exercise of its power "To promote the Progress of Science and useful Arts," Congress, by granting copyrights, has created valuable property rights. See American Tobacco Co. v. Werckmeister, 207 U.S. 284, 28 S.Ct. 72, 52 L.Ed. 208, 12 Ann.Cas. 595; White-Smith Music Pub. Co. v. Apollo Co., 209 U.S. 1, 18, 19, 28 S.Ct. 319, 323, 52 L.Ed. 655, 14 Ann.Cas. 628. Because of a conflict between two Circuits we must now for the first time pass on the amenability to our revenue law of proceeds derived from the transfer of some of these interests. A ruling of the Treasury and a supporting decision of the Court of Appeals for the Second Circuit have made taxability turn on the notion that a copyright is indivisible. As a corollary it was assumed that a transfer of less than all the rights conferred by § 1 of the Copyright Law makes the transaction, regardless of the intent of the parties, a "mere license." On that ground the Government has here pressed its claim of taxability. The Court of Appeals for the Fourth Circuit has rejected the notion of indivisibility and consequently found lump-sum payments by a purchaser of the exclusive serial publication rights not to be within § 211(a)(1)(A) of the Internal Revenue Code, 26 U.S.C.A. § 211(a)(1)(A). By the plain implication of its silence regarding the basis of the Government's claim and of the decisions that have heretofore sustained it, this Court likewise rejects the notion of indivisibility while clinging to a conclusion hitherto entirely derived from it.

The case calls for inquiry into the scheme of taxation of American income of alien copyright holders as well as review of administrative and judicial treatment of such income. To put this discussion in the perspective of concreteness, however, the facts out of which the controversy arises should first be stated. The transaction which produced the income found taxable by the Commissioner for the year 1941 is typical of the other transactions that yielded the proceeds claimed to be covered by § 211(a)(1)(A) for the various tax years here involved.

Wodehouse, the writer of popular stories and novels, a nonresident alien and "not engaged in trade or business within the United States," transferred, on August 12, 1941, through his American literary agent, to the Curtis Publishing Company for $40,000 "all rights in and of all stories and special articles appearing in its publications' of a certain novel, entitled, 'Money in the Bank." The contract provided that after publication in a Curtis magazine, Curtis was to reassign to Wodehouse "on demand all rights, except North American (including Canadian) serial rights." The documents involved in each of the various transactions made clear beyond question that Curtis, as buyer, intended to secure, if legally possible, an absolute, exclusive, and irrevocable transfer of the serial rights for all of North America, including Canada, and that Wodehouse, as transferor, intended to transfer, with no desire to retain any control whatsoever, all the North American serial rights of the novel. Indeed, to assure Curtis unqualified control, Wodehouse agreed to exercise other rights in a way to assure Curtis full protection and enjoyment in the serial publication rights.

The Tax Court never questioned that these transactions were intended to be absolute transfers. Instead, it relied on Sax Rohmer, 5 T.C. 183, affirmed 2 Cir., 153 F.2d 61, which had held that an assignment of less than substantially all of the rights conferred by a copyright was necessarily only a license, and therefore that the proceeds received had to be regarded as for the use, rather than the sale, of the copyright. 8 T.C. 637. The Court of Appeals for the Fourth Circuit, upon full consideration of the Rohmer case, rejected its notion that there cannot be a sale of less than the whole, and, finding no barrier to the law's recognition of the true nature of the transaction, namely irrevocable transfers of an interest in personal property, reversed the Tax Court. 4 Cir., 166 F.2d 986 (one judge dissenting).

This Court now reverses the Court of Appeals without facing the question which the Treasury, the Tax Court, and the two Courts of Appeals deemed controlling on each occasion when the problem was presented. Instead, the Court appears to be guided, in however low a key that consideration is pitched, in construing the applicable provisions of the Internal Revenue Code by the urgent need for revenue. To let this need determine judicial construction of the Internal Revenue Code would largely dispense with explicitness and technical precision in revenue measures. 'Long prior practice' is invoked to support the fiscal considerations. This reliance is illusory. It completely ignores that the practice of which we have been advised is tenuous and, in any event, rests solely on the notion of the indivisibility of copyrights. To derive the existence of a practice from a single pronouncement by the Treasury, constituting not the formulation of a fiscal policy but expressing a metaphysical view of copyright law not adopted by this Court, gives a very loose meaning to the word 'practice.'

1. The Commissioner here determined a deficiency and the Tax Court sustained the deficiency under § 211(c)(1). That section deals with gross incomes of more than $24,000 received by nonresident aliens 'not engaged in trade or business within the United States.' 26 U.S.C. § 211(c)(1) (1941), 26 U.S.C.A. § 211(c)(1). For the sources of taxable gross income it refers to § 211(a)(1) (A), which specifically deals with the taxation of nonresident aliens like Wodehouse. The authority under which the tax was here levied provides: 'There shall be levied, collected, and paid (a tax on) * *  * the amount received *  *  * from sources within the United States as *  *  * other fixed or determinable annual or periodical gains, profits, and income *  *  * .' 26 U.S.C. § 211(a)(1)(A), 26 U.S.C.A. § 211(a)(1).

2. The Court draws on § 119(a)(4) to support the tax. But proceeds within § 119(a) cannot be considered within § 211(a)(1)(A) unless the definition of § 211(a)(1)(A) is also satisfied, that is, unless the proceeds are 'fixed or determinable annual or periodical income.' Cf. U.S. Treas. Reg. 111, § 29.143-2. The subsection of § 119(a) serve merely to define what proceeds are to be deemed localized in the United States for tax purposes; they settle only the geographic question; § 119(a) is not a tax-imposing provision; other sections of the Code serve that function.

3. An analysis of the relevant provisions, in light of the changes made in 1936, makes this perfectly clear. Until 1936, the tax-imposing provisions were coterminous with the provisions of § 119(a) in defining the taxable gross income of a nonresident alien. This was so because taxability was limited only by § 211(a) of the Revenue Act of 1934 which provided that "In the case of a nonresident alien individual gross income includes only the gross income from sources within the United States." 48 Stat. 735. Supplement H of the Revenue Act of 1934 provided for deductions and credits, §§ 212-215, 48 Stat. 736-737, but there was no other provision further defining or limiting the type of receipts to be included in gross income. See 48 Stat. 735-737, 684. Thus, whatever was gross income from a source within the United States was taxed. By the Revenue Act of 1936, Congress changed the scheme of taxing nonresident aliens. 49 Stat. 1714; see 8 Mertens, The Law of Federal Income Taxation, § 45.16, et seq. (1942). For those who have a place of business in the United States it retained the system of taxing all proceeds from sources within the United States. Revenue Act of 1936, § 211(b), 49 Stat. 1714. As to such aliens the provisions of § 119 continued to determine what receipts were to be included. And that has remained the law. 26 U.S.C. § 211(b), 26 U.S.C.A. § 211(b). But as to those who are "not engaged in trade or business within the United States," the only type of proceeds to be taxed were those which were attributable to sources within the United States but only if there were "fixed or determinable annual or periodical gains, profits, and income." Such has remained the law and controls this case. Compare 26 U.S.C. § 211(a)(1)(A), 26 U.S.C.A. § 211(a)(1)(A), the applicable provision when the nonresident alien is not engaged in trade or business within the United States, with 26 U.S.C. § 211(b), 26 U.S.C.A. § 211(b), the section applicable when the nonresident alien has a place of business in the United States.

The specifically defined receipts-fixed or determinable annual or periodical gains, profits, or income-are not words giving rise to an exemption, and as such to be strictly construed. They are the controlling basis for taxation. To be taxable under § 211(a)(1)(A) the proceeds must be from sources within the United States, as set forth in § 119(a), but also of the nature defined in § 211(a)(1)(A). See 54 Yale L.J. 879, 881-882 (1945); 48 Col.L.Rev. 967 (1948); cf. U.S. Treas. Reg. 111, § 29.14 -2. Since the reach of § 211(a)(1)(A) does not include the proceeds from a sale, receipts from a sale are not taxable even though such proceeds are from a source within the United States and, as such, are listed in § 119(a)(5)-(6). The Regulations have made this explicit. U.S. Treas. Reg. 111, §§ 29.211-7, 29.143-2; see also S. Rep. No. 2156, 74th Cong., 2d Sess., p. 21 (1936); H.R. Rep. No. 2475, 74th Cong., 2d Sess., pp. 9-10 (1936).

The changes made in 1936 in the method of taxing income of a nonresident alien "not engaged in trade or business within the United States" make the taxing provisions coterminous, not with § 119(a), but with § 143(b), the section providing for withholding taxes at the source. Section 143(b) emphasizes that proceeds within § 119(a) do not come within the scope of § 143(b) unless the additional qualification contained in § 143(b) is also met. Section 143(b) provides that the tax should be withheld in come which is "fixed or determinable annual or periodical gains, profits, and income (but only to the extent that any of the above items constitutes gross income from sources within the United States) * *  * ." 26 U.S.C. § 143(b), 26 U.S.C.A. § 143(b). Here again, since "the income derived from the sale in the United States of property, whether, real or personal, is not fixed or determinable annual or periodical income," it is not included. U.S. Treas. Reg. 111, §§ 29.143-2. Only by not observing the requirement that the proceeds must not only be from a source in the United States but also "annual or periodical" to the subject either to withholding under § 143(b), or to taxation under § 211(a)(1)(A), can it be said that proceeds which prior to 1936 were held to be under § 119(a)(4) are ipso facto within § 211(a)(1)(A) after 1936 regardless of the nature of the revenue.

Therefore, inquiry which seeks to discover prior practice as an aid to construction should properly address itself to whether such proceeds were withheld under § 143(b) before 1936. Inquiry as to § 119(a) is completely irrelevant because it is clear that before 1936 many items were included in § 119(a) which were not withheld under § 143(b). Since 1936 the only proceeds which are taxed to a nonresident alien not engaged in a trade or business in the United States are those which are "fixed or determinable annual or periodical gains, profits, and income," which is the only type of proceeds on which taxes were withheld at the source before as well as after 1936. Therefore Treasury practice regarding the withholding requirement prior to the 1936 legislation would be relevant. There is a total absence of any showing that the Treasury before 1936 regarded such proceeds subject to withholding under § 143(b). And in the analogous situation of lump-sum payments for the absolute transfer of some but not all of the exclusive rights conferred by the patent law, courts have held such proceeds not subject to withholding under § 143(b). General Aniline & Film Corp. v. Commissioner, 2 Cir., 139 F.2d 759; cf. Commissioner of Internal Revenue v. Celanese Corp., 78 U.S.App.D.C. 292, 140 F.2d 339.

The Regulations, to be sure, give "royalties" as an example of proceeds which are within the phrase "fixed or determinable annual or periodical gains, profits, and income." See U.S. Treas. Reg. 111, § 29.211-7. But proceeds sought to be brought within the term "royalties" must be of a nature which justifies that classification. Royalties are within the section only because they meet the above description. It completely ignores the intrinsic character of "royalties," and therefore the basis of including them in the larger category of "fixed or determinable annual or periodical gains, profits, and income," to infer that proceeds which do not meet that description but result from the use of another method of realizing economic gain from a property right that of sale rather than a license producing a recurring income are also "royalties." See 48 Col.L.Rev. 967, 969 (1948). By such reasoning pr ceeds from the sale of a house would also be within § 211(a)(1)(A) because another way that the owner could have realized gain on the property would have been to have leased it over its lifetime.

Free judicial rendering of needlessly imprecise legislation is sufficiently undesirable in that it encourages Congress to be indifferent to the duty of giving laws attainable definiteness. Here was are dealing with legislation that is precise. Yet the Court chooses not to give it effect and it does so on the basis of fiscal considerations which Congress, by what it enacted, chose not to write into law.

It must be remembered that the problem here is not to determine what is income in either a constitutional or an economic sense. The proceeds from the sale of a house over and above its cost to the seller are as much income as is a judge's salary. Nor is the problem one of determining whether something which is usually regarded as income is to escape a tax because the parties by agreement act in such a way as to cause the proceeds to be received in a different manner. Cf. Lyeth v. Hoey, 305 U.S. 188, 59 S.Ct. 155, 83 L.Ed. 119, 119 A.L.R. 410. There is no suggestion that the transaction as it appears on the surface was not the transaction in truth. The fact that the incidences of income taxation may have been taken into account by arranging matters one way rather than another so long as the way chosen was the way the law allows, does not make a transaction something else than it truly is-it does not turn a sale into a license. Helvering v. Gregory, 2 Cir., 69 F.2d 809, 810. Therefore, the principle of tax evasion is irrelevant to the disposition of this case, except on the assumption that Congress itself evaded its own tax purposes and that the Court must close what Congress left open. It is taking too much liberty even with tax provisions to read out a defining clause that Congress has written in merely because Congress permitted desirable revenue to escape the tax collector's net. The only judicial problem is whether the proceeds constitute a type of income which Congress has designated as taxable. That type must have the characteristic of being "fixed or determinable annual or periodical gains, profits, and income." A lump-sum payment for an exclusive property right, transferable and transferred by the taxpayer, simply does not meet that qualification. Unless there is something inherent in the copyright law to prevent it, such a transaction is the familiar "sale of personal property." U.S. Treas. Reg. 111, § 29.211-7. Surely it is a sale of a capital asset. See Learned Hand, J., in Goldsmith v. Commissioner, 2 Cir., 143 F.2d 466, 467. As such it is not subject to the tax. The legislative history leaves no doubt on this point.

4. So far it has been assumed that these proceeds would be within § 119(a) (4). But neither this Court nor Congress has ever said so; indeed no court other than the Court of Appeals for the Second Circuit, and the Tax Court (but only after its contrary determination was reversed by the Court of Appeals for the Second Circuit) has said so. But it is urged that a 'long prior practice' of including under § 119(a)(4) proceeds received as lumpsum payments for the absolute transfer of some but not all of the rights conferred by the copyright law, and therefore taxing them to nonresident aliens under the prior statute, prevents this Court from applying § 211(a)(1)(A) according to the fair meaning of its own terms. It is suggested that no matter what Congress has written on the statute books it is to be assumed that Congress would not give up a source of revenue it had once tapped. This suggestion is made despite the fact that Congress said that it was changing the method of taxing the income of nonresident aliens and that it also said that certain items, previously taxed, would now be exempt. S.Rep.No.2156, 74th Cong., 2d Sess., pp. 9-10 (1936); H.R.Rep.No.2475, 71st Cong.2d Sess., p. 21 (1936). What is this long prior practice that has encrusted the phrase, "royalties for the use of the privilege of using in the United States, patents, copyrights * *  * and other like property," with a meaning that contradicts its own terms not otherwise defined by Congress, yet precludes this Court from construing it according to the obvious purport of familiar words?

Section 119(a)(4), or a provision with similar phrasing, has been part of the Revenue Laws since 1921. See Revenue Act of 1921, § 217(a)(4), 42 Stat. 244. Soon after its enactment the Bureau ruled that receipts from the absolute transfer by a nonresident alien of the rights to serial publication in the United States of certain literary works were not derived from a source in the United States. The reason given was that the transaction did not constitute a license for use, but a sale. O.D. 988, 5 Cum.Bull. 117 (1921); see also I.T. 2169, IV-1 Cum.Bull. 13 (1925) (sale of motion picture right to play deemed a sale of a capital asset). The ruling prevailed through the subsequent reenactment of the phrasing in § 119(a)(4) in 1924, 1926, 1928, and 1932, see 43 Stat. 273, 44 Stat. 30, 45 Stat. 826, 827, 47 Stat. 208, 209. In 1933 the Bureau made a contrary ruling which expressly revoked the one made in 1921. But the facts on which the Bureau took this action are important.

The taxpayer had received the income in question pursuant to contracts with a number of publishers and producers under which he had granted serial rights in books already written, reserving a "stipulated royalty per copy sold." The Bureau characterized all but one of these contracts as requiring "stipulated sums * *  * to be paid him as royalties." Moreover, in some of these contracts yearly licenses were granted, renewable at the taxpayer's option, with stipulated royalties per copy. In one contract a company was granted first American and Canadian serial rights in the taxpayer's exclusive output of both long and short stories for which the company was to pay a stipulated sum of money, and in another contract the taxpayer granted motion-picture rights throughout the world, the consideration to be paid in installments. The Bureau ruled that these proceeds were within the phrase " * *  * royalties from *  *  * (or) for the use of or for the privilege of using in the United States *  *  * copyrights *  *  * ." 26 U.S.C. § 119(a)(4), 26 U.S.C.A. § 119(a)(4).

The reasoning on which this conclusion was based deserves attention. This is the crux of it:

"The taxpayer in these contracts granted the publishers and producers licenses to use in particular ways his literary property and his copyright therein, and exacted from them certain payments for that use. These were not, and could not be, contracts of sales; they were in fact contracts of license, and the payments for such licenses constituted rentals or royalties subject to tax as such. * *  *

" * *  * Since the grant by the taxpayer in each instance is so clearly the grant of a particular right in all the rights constituting the taxpayer's literary property and copyright, the conclusion is obvious that the grant is a license and not a sale.

"In Office Decision 988, supra, a grant of all rights of serial publications in the United States in certain literary works was through error said to be a sale. Such a grant could only be a license. Office Decision 988 is accordingly revoked." I.T. 2735, XII-2, Cum.Bull. 131, 135 (1933).

Thus it is seen that on the Bureau's earlier construction that the Copyright Law permitted a sale, such proceeds were excluded. O.D. 988, 5 Cum.Bull. 117 (1921). After twelve years the Bureau decided that, as a matter of Copyright Law, and not by way of formulating a fiscal policy, there could be no sale of serial rights, and that such a transaction had to be treated as a license, periodically producing income. Plainly the Bureau was not interpreting tax law but copyright law. Deference no doubt is due to an administrative body's interpretation of law dealing with its specialty-particularly to interpretations by those whose task it is to administer the Revenue Laws. But the Bureau's expertness does not extend to the Copyright Law. Such matters do not involve the subtleties of tax concepts. The determination rather is like that of a question of common law, and such questions have never been thought to be of a the tax provisions pertaining to nonresident given to the administrative view. Cf. Bingham's Trust v. Commissioner, 325 U.S. 365, 377, 381, 65 S.Ct. 1232, 1238, 1240, 89 L.Ed. 1670, 163 A.L.R. 1175. Under these circumstances the Bureau's determination has little weight, and certainly does not bar this Court from properly construing the Copyright Law, especially where Congress had thoroughly overhauled the tax provisions pertaining to nonresident aliens less than three years after the Bureau ruling was made. As one swallow does not make a summer, this one ruling hardly establishes a practice, and certainly does not disclose a consistency which deserves to be called 'long.'

Balanced against this one Bureau decision, such as it is, is the significant fact that at the crucial time-in 1936, when Congress devised the present scheme of taxing non-resident aliens a more authoritative decision was explicitly to the contrary. This was the holding of the Board of Tax Appeals in Refael Sabatini, 32 B.T.A. 705. In the Sabatini case the Board held that the lump-sum payments received for exclusive orld motion-picture rights were not within § 119(a)(4). About such proceeds it said:

"The situation respecting the granting of motion picture rights is quite different from the other rights above discussed. In none of the motion picture contracts did petitioner obtain any income from the reproduction and sale or other use of his writings in the United States as in the case of the Houghton Mifflin Co. and Wagner contracts. Here the granting of rights was made in consideration of a lump sum. The sale of these rights took place in England (citing a case), and there was no subsequent income in the nature of rents or royalties from sources within the United States. We are accordingly of the opinion that the lump sums received by petitioner for the motion picture rights do not come within the statutory definition of income from sources within the United States and are not taxable income." Rafael Sabatini, 1935, 32 B.T.A. 705, 712-713, reversed on this point, 2 Cir., 1938, 98 F.2d 753, 755.

Thus at the time of the adoption of the present § 211(a)(1)(A) this was the authoritative administrative ruling as to § 119(a)(4). It is not suggested that knowledge of this ruling must be attributed to Congress but this ruling refutes the assumption that there was a settled practice the other way. To the extent that it could be considered settled, it was contrary to the Court's account of it. Finally it shows at least that what administrative practice there was could not be considered settled.

After the Board was reversed in the Sabatini case it of course followed the decision of the Court of Appeals. The passage of the Internal Revenue Code, including § 211(a)(1)(A) is hardly a ground for implying legislative adoption of the construction placed on § 119(a)(4) by the Court of Appeals for the Second Circuit Helvering v. Hallock, 309 U.S. 106, 120-121, note 7, 60 S.Ct. 444, 451-452, 84 L.Ed. 604, 125 A.L.R. 1368. When the entirely distinct problem involved in § 211(a)(1)(A) came before the Court of Appeals for the Second Circuit, it based its decision on the determination that the proceeds were for the use of the copyright rather than a sale. That decision, like the Sabatini case, was based primarily on the doctrine of the indivisibility of a copyright. When that doctrine is rejected it has been held to follow, as we have seen, that the proceeds are not included. That was the basis of decision in the Fourth Circuit, now under review. Moreover, the Court of Appeals for the Second Circuit has reached a result contrary to its copyright cases when dealing with the proceeds from the transfer of some but not all of the rights conferred by the patent statute. It did so despite the fact that the term 'royalties' includes proceeds for the use of patents, 26 U.S.C. § 119(a)(4), 26 U.S.C.A. § 119(a)(4), and that, as will be seen, the theory of the indivisibility of a copyright had its genesis in a doctrine first applied in the patent field.

5. Thus we are brought to the question which the Treasury, the courts and the parties here have regarded as determinative of this controversy: may serial rights under a copyright be sold in law as they constantly are sold in the literary market? Specifically, is there some inherent obstacle of law which precludes the sale of such serial rights from having the usual incidents of a commercial sale? If it were impossible to make a sale, then the proceeds arguably are 'royalties' because in that event the transfer can have been only for the use. There would still remain the difficulty of getting the lumpsum payments within the reasonable meaning of § 211(a)(1)(A). For, it is fair to recall that, § 119(a)(4) would only determine whether the payment is from a source within the United States, not whether it is taxable. There would be the further difficulty of calling a payment a 'royalty' when its amount bears only that relation to the future proceeds obtained by the transferee in exploiting the literary product as would be reflected in the purchase price of any income-producing property. If, on the other hand, the valuable right that, commercially speaking, was in fact sold, may as a matter of law also be treated as a sale, the proceeds would not be included. This conclusion, derived from a reading of § 211(a)(1)(A), is made explicit by the Regulations and the House and Senate Reports. See 337 U.S. 409, 69 S.Ct. 1139.

The notion that the attributes of literary property are by nature indivisible and therefore incapable of being sold separately, is derived from a misapplication by lower courts of two early cases in this Court. These were concerned with the right of the transferee of less than all the rights conferred by a patent to sue an infringer. The inherent nature of the interests in intellectual property and their commercial negotiability were not involved. The Court determined the procedural problem before it so that the infringer would not 'be harassed by a multiplicity of suits instead of one,' and would be not subjected to 'successive recoveries of damages by different persons holding different portions of the patent right in the same place.' Gayler v. Wilder, 1850, 10 How. 477, 94-495, 13 L.Ed. 504; Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 335, 34 L.Ed. 923. But in its bearing on the procedural point, one of these cases recognized the saleability of less than all of the patented rights so long as the transfer consisted of at least one of the three rights separately listed in the patent statute. Waterman v. Mackenzie, supra.

We thus find scant illumination of the intrinsic and legal nature of property rights in a copyright in the procedural analysis of these cases. Keener insight into such rights has been given by Mr. Justice Holmes in a case involving substantive questions in the law of copyrights:

'The notion of property starts, I suppose, from confirmed possession of a tangible object, and consists in the right to exclude others from interference with the more or less free doing with it as one wills. But in copyright property has reached a more abstract expression. The right to exclude is not directed to an object in possession or owned, but is in vacuo, so to speak. It restrains the spontaneity of men where, but for it, there would be nothing of any kind to hinder their doing as they saw fit. It is a prohibition of conduct remote from the persons or tangibles of the party having the right. It may be infringed a thousand miles from the owner and without his ever becoming aware of the wrong. It is a right which could not be recognized or endured for more than a limited time, and therefore, I may remark, in passing, it is one which hardly can be conceived except as a product of statute, as the authorities now agree.' White-Smith Music Pub. Co. v. Apollo Co., 209 U.S. 1, 18, 19, 28 S.Ct. 319, 324, 52 L.Ed. 655, 14 Ann.Cas. 628; see also Learned Hand, J., in Photo Drama Motion Picture Co. v. Social Uplift Film Corp., D.C.S.C.N.Y., 213 F. 374, 378.

The 'right to exclude others from interference with the more or less free doing with it as one wills' is precisely the right that Wodehouse transferred to Curtis. To the extent that the Copyright Law gave Wodehouse protection in the United States, he transferred all he had in property of considerable value-the serial rights in his novels-and Curtis acquired all of it. For the duration of the monopoly granted by the Copyright Law, Curtis could assert the monopoly against the whole world, including Wodehouse himself.

Nothing in the law of copyrights bars or limits sale of any one of the numerous exclusive rights conferred by the various subdivisions of § 1. Congress has not disallowed such sales and nothing in the due enforcement of the Copyright Law suggests their disallowance. Quite the contrary. See II Ladas, The International Protection of Literary and Artistic Property, pp. 775-792 (1938). The scheme and details of the Copyright legislation manifest a separate treatment of the various exclusive rights conferred by the statute. 61 Stat. 652, 17 U.S.C. § 1 et seq., 17 U.S.C.A. § 1 et seq. It segregates these rights into separately numbered paragraphs. In each paragraph there is listed, in the alternative, a more detailed subdivision of the various rights. Each of these rights is substantial and exists separately from the others, and has of course been considered a property right. See Photo Drama Motion Picture Co. v. Social Uplift Film Corp., D.C.S.D.N.Y., 213 F. 374, 377; see Fulda, Copyright Assignments and the Capital Gains Tax, 58 Yale L.J. 245, 256 (1949). Moreover, the Copyright Office will record these partial assignments, thus protecting the transferee and thereby increasing the marketability of the separate rights. 61 Stat. 652, 17 U.S.C. § 30, 17 U.S.C.A. § 30; see Photo Drama Motion Picture Co. v. Social Uplift Film Corp., D.C., 213 F. 374, 376-377; see II Ladas, The International Protection of Literary and Artistic Property, p. 802 (1938).

Only the other day the House of Lords, dealing with a similar copyright law, held that the sums received from the transfer of the motion picture rights in a novel were proceeds from a sale of property rather than a license and therefore not taxable as 'annual profits or gains.' Withers v. Nethersole, (1948) 1 All.E.R. 400. There was there, as here, the need to determine if the proceeds were from a sale. The taxpayer had transferred for ten years 'the sole and exclusive motion picture rights throughout the world.' The House of Lords held that the proceeds were not 'annual profits or gains' since the transaction was an outright sale, not a license to use the copyright. This portion of the late Lord Uthwatt's judgment is especially pertinent:

'The fact that the same commercial result as that produced by the assignment might equally well have been achieved by an appropriately worded license is irrelevant. It is irrelevant that the consideration may be assumed to represent the value of the whole copyright so far as it relates to motion pictures for a period of years, but the consideration was paid, not in respect of the temporary use of another's property, but for the purchase of property with a limited life. The taxpayer may have exploited her property, but she did so only by dividing it and selling part of it. * *  * The relevant fact is that an owner of an asset, entitled by law to divide it into two distinct assets, has done so by selling one of those assets for an agreed consideration payable in a lump sum. A sale, not in the way of a trade, of an asset does not attract tax on the consideration. Whatever else comes within the ambit of annual profits and gains, the consideration received by the taxpayer does not.' Withers v. Nethersole, (1948) 1 All.E.R. 400, 405.

I am not suggesting that the decision of the House of Lords requires our concurrence. To pass it over in silence, however, is not to answer it.

Another case likewise deserves attention. In the Second Circuit, interestingly enough, it was held that a transfer of exclusive motion-picture rights was 'a sale' of a 'capital asset' for the purpose of § 117. Goldsmith v. Commissioner, 2 Cir., 143 F.2d 466. But if the transfer was a sale of a capital asset, it could not also have been within § 211(a)(1)(A). See S. Rep. No. 2156, 74th Cong., 2d Sess., p. 21 (1936); H.R. Rep. No. 2475, 74th Cong., 2d Sess., pp. 9-10 (1936).

To treat the transfer of any one of the various rights conferred by the Copyright Law as a sale would accord not only with analysis of their essential character and the scheme of the Copyright Law, but with the way these rights are treated by authors and purveyors of products of the mind for whose protection the Copyright Law was designed because of the belief that the interests of society would be furthered. The various exclusive rights have different attributes and therefore different significance. For that reason they may be sold separately and form the basis for a new copyright. The author 'could sell separately the right to dramatize and the right to make a moving picture play.' Photo Drama Motion Picture Co. v. Social Uplift Film Corp., D.C.S.D.N.Y., 213 F. 374, 377, affirmed 2 Cir., 220 F. 448. See as to the commercial practice, Fulda, Copyright Assignments and the Capital Gains Tax, 58 Yale L.J. 245, 253-54 (1949); see also Ladas, The International Protection of Literary and Artistic Property, passim (1938).

Thus it would seem as a matter of legal doctrine that where a person transfers absolutely to another, under terms of payment which do not depend on future use by the transferee, a distinct right conferred by the Copyright Law granting the transferee a monopoly in all the territory to which the Copyright Law itself extends, legal doctrine should reflect business practice in recognizing that the proceeds are from 'the sale of personal property,' rather than amounts received as 'fixed or determinable annual or periodical gains, profits, and income.'

It is argued that Congress doubtless intended to tax an alien author for the proceeds of a sale of serial rights, because such proceeds are taxable to an American author. By this mode of reasoning the Court ought to hold that since an American author is taxed when he sells all his rights, the proceeds derived by an alien author from the sale of all his rights in this country are also taxable for that is a much larger source of potential revenue. Yet Congress has chosen not to tax the alien author for such larger income than is received from the sale merely of serial rights, although the native author is so taxed. It is for Congress to make differentiations between alien and American authors and we should respect the differentiations Congress has made for the sale both of serial and total rights as between alien and American authors. The need for revenue is no justification for warping the provisions of the 1936 legislation to deny immunity from taxation to a nonresident alien author for the entire transfer of some of the property interests explicitly conferred by § 1, particularly in view of the fact that Congress knowingly chose to leave untouched the more sizeable source of revenue available where the nonresident alien ells all the rights conferred by § 1. Wodehouse made an absolute transfer of some of those rights. He did not receive royalties but instead gave up that chance in return for a lump sum just as the seller of a house gives up the right to receive rent in return for the purchase price. That transaction can only be regarded as a sale. As the revenue laws now stand, it was nontaxable.

I would affirm the judgment below.